Investors are preparing for the implications of President-elect Donald Trump’s return to the White House, often referred to as “Trump 2.0.” Following his victory in the November 2024 elections, Trump is expected to implement significant economic policies that could reshape both domestic and global markets. Here’s an analysis of what to expect from his administration and its potential impact on the financial landscape.

Trump is anticipated to reinstate and potentially escalate trade tariffs, particularly targeting imports from China. Proposed tariffs could range from 10% to 20%, with maximum rates possibly reaching 60% on certain goods. This protectionist approach aims to address trade imbalances and support U.S. manufacturing.
Analysts warn that such tariffs could trigger retaliatory measures from affected countries, leading to a trade war that may disrupt global supply chains and increase costs for consumers and businesses in the U.S. However, Trump’s administration may use these tariffs as leverage in negotiations rather than as permanent measures.

Trump’s administration is expected to prioritize tax cuts, including proposals to reduce corporate tax rates from 21% to 15% for domestic manufacturers. This move would position the U.S. among the lowest corporate tax jurisdictions globally.
The continuation of tax policies established under the Tax Cuts and Jobs Act (TCJA) is likely, with efforts to extend existing provisions before they expire at the end of 2025. While these tax cuts could stimulate economic activity in the short term, they may also exacerbate the federal deficit if not offset by corresponding spending cuts.

Historically, Trump’s policies have led to short-term market exuberance due to anticipated growth from tax cuts and deregulation. However, potential trade wars and inflationary pressures could introduce volatility.
Investors are currently optimistic about sectors likely to benefit from Trump’s policies, such as manufacturing and energy, while remaining cautious about sectors vulnerable to increased costs from tariffs.

The U.S. dollar remains strong as investors anticipate a pro-growth agenda under Trump’s leadership. However, if inflation rises significantly due to tariffs and other policies, it could lead to a reevaluation of dollar strength.
Emerging market currencies may face challenges as a stronger dollar typically leads to capital outflows from these economies.